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Effectively Pricing the Value Proposition
Jeffrey Tripp Director – Administration, Hurstville City Council
Narayan van de Graaff Managing Director, Advanced HR Solutions
Effective Price Re-Setting Workshop 2015 2
Road Map
The Need / Opportunity
Hurstville City Council project program
Key training content
Outcomes/impact on results
Applicability for other Councils
Conclusion/key points
Criteria Results
Hurstville City Council
BENCHMARK RESULTMEETS FFTF
BENCHMARK
-0.011 NO
Own Source Revenue Ratio (greater than 60% average over 3 years) 82.93% YES
52.39% NO
Infrastructure Backlog Ratio (less than 2%) 0.89% YES
Asset Maintenance Ratio (greater than 100% average over 3 years) 87.27% NO
Debt Service Ratio (greater than 0 and less than or equal to 20% average over 3 years) 1.88% YES
Decreasing YES
OVERALL RESULT
The Council does not meet all seven of the Fit for the Future Criteria
Building and Infrastructure Asset Renewal Ratio (greater than 100% average over 3 years)
A decrease in Real Operating Expenditure per capita over time
Operating Performance Ratio (greater or equal to break-even average over 3 years)
Current Price-Setting Practice
National/Vic Surveys: Most Councils simply add CPI
Few recoup all fixed and/or indirect costs
Often little commercial rigour applied
Project Program 2013 - 2015
Oct 2013ParticipantPreparation
Dec 2013One-day
Workshop
Feb 20141/2 Day Workshop:
Peer Review
June 2014 Council Adopts new
Fees & Charges
Feb 2015Workshop:Review ‘14 Outcomes
June 2015 Council Adopts new
Fees & Charges
Key Content: Day One (Dec 2013)
Links to Integrated Planning & Reporting
Pricing links to IP & R
Hurstville Council’s financial realities
Links to Quadruple Bottom Line
Elasticity of Demand/Supply
Price elasticity of demand (and supply)
Various determinants of elasticity
Elasticity of demand for Council services
The Power of Pricing
Traditional focus on costs, not pricing
However, pricing has greater bottomline leverage
DuPont exercise to demonstrate power of pricing
Impact of Fees & Charges on 2014 Council income
Rationale/Principle Regulated Zero Cost Recovery Partial Cost Recovery Direct Cost Recovery Full Cost Recovery Market Pricing, etc.
Key Points:Not just annual CPI increaseFor each Fee or Charge: Which principle is relevant? What are industry / market benchmarks?
Fees & Charges(your area)
Council Code
Pricing Principle
Pricing Basis
Reason for choice
Conscious Pricing
Marketing and Advertising
The six P’s of Marketing
What is our competitive advantage?
What is the message?
Which media should we use?
Peer Review Feb ‘14: Proposed Fees & Charges
Managers explain rationale for proposed fees & charges
Peer and facilitator feedback given to each presenter
Extra material on marketing strategies/advertising media
Key Content: Workshop Feb 2015
1414
Impact of New Fees and Charges
Impact on year’s financial results
Non-financial benefits (eg- compliance)
15
Improvements to Methodology
How are new prices communicated internally
and externally?
What systems and documents need updating?
16
Pricing is not the only factor....
Financial Results
• 19 fee increases >10% = $430kpa additional income
• 11 price reductions >10% = 43% increase in volume
• 29 new charges = $100kpa additional revenue with no incremental cost increase
Operational Benefits• Community utilisation of rooms/halls up by 18%• Increased building inspection/certification
services with greater rigour/compliance• New fees recovering costs for statutory services,
easing the Rate burden on non-users• Late fines on children’s library assets have
decreased overdues by 62%• Price increases at our market-leading Child Care
Centres give room for competitors to improve their quality/service offerings to our community
• Demand relieved on facilities operating at or above capacity (eg- Gym/Aquatic Centre)
Culture Change
“I thought all my fees were set by legislation, so didn’t feel the Effective Price-Setting program would be relevant to me. I was amazed at the range of user-pay charges applied by other Councils and scope I had within the statutory guidelines to cover my team’s costs. We feel more confident now in applying a wider range of fees, charges, recoveries and contributions.” (Development Assessment Manager)
“My team’s focus is improving safety and built-form compliance on development sites. I was delighted when my proposal to reduce inspection and certification fees was approved by Excom and Council. Our market share against Private Certifiers is turning around and we are introducing a further discount to developers who appoint us as certifiers when lodging their DA.” (Building Compliance Manager)
More Culture Change
“We thought we would have an uproar if we introduced a late fine on children’s assets. But by just charging 20 cents per day on books/toys we decreased overdues by 62%. We only got 2 complaints but have drastically improved availability.” (Library Manager)
“The vacancy of our auditoriums and meeting rooms was high and we were struggling to cover fixed costs. By reducing our hourly hire fees we improved utilisation by 18% and actually increased revenue by 2%! We are going to introduce a Public Holiday surcharge next year to ensure the extra labour costs are not shared amongst other clients.” (Entertainment Centre Manager)
“We have made so many improvements this year, I want the next Price Re-Setting module to be extended to my Supervisors and Team Leaders.” (Engineering Services Manager)
Summary
Enormous potential for other Councils across Australia to reap the similar benefits
SUCCESS!!
Training for Other Councils
Workshops delivered to 9 NSW Councils in 2014
Interested in this Program for your Council?
Narayan van de Graaff
Phone: 0438 792 300
Email: [email protected]
Website: advancedhr.com.au
2424Jeffrey Tripp
